Budget Report 2018

With a freshly minted budget presented by the Chancellor today, we look at the highlights for small business owners:

Business Tax

Corporation Tax – Corporation Tax remains at 19% with a reduction to 17% pencilled for 2020.

VAT – there was speculation that the VAT registration threshold would be slashed, requiring many more small businesses to register.  In fact the Chancellor merely froze it at £85,000 for the next two years rather than increasing in line with inflation.

National Insurance – there were the usual adjustments to thresholds on Class 4 contributions for self employed business owners. The Chancellor introduced a restriction Employer's NI Allowance that will not affect any small or business owners. The £3,000 allowance will only now be available to employers with an NI bill of less than £100,000 in the last tax year.

Business Rates – this was probably the biggest piece of news for small business owners. From 2019-20 tax year, independent retail shops, pubs, cafes and restaurants with premises having rateable value of £51,000 or less will see business rates cut by a third. Sadly there is no corresponding cut for manufacturing, service or leisure sectors.

National Living Wage – this will increase to £8.21/hr from April 2019.

R&D Tax Credit Cap - Tax Credits will be capped from 2019 to three times a NI and PAYE liabilities for loss making companies.

Personal Tax

Personal Allowance – the allowance increases have been brought forward meaning that the Personal Allowance leaps to £12,500 from April.

Tax Bands – The Basic Rate band has been increased to £37,500 which when combined with the personal allowance of £12,500 means Higher Rate tax now kicks in at £50,000. This is a significant shift which will save people earning £50,000 £860 per year.

ISA Allowance - the ISA allowance remains at £20,000 in 2019-20 unlike the Junior ISA allowance which goes up with inflation to £4,368.

Capital Gains Tax – the budget introduced new restrictions on Private Residence Relief. For most homeowners these changes are not relevant but there are changes where properties have been let and properties where the homeowner moves out before selling.

The Chancellor also extended the minimum qualifying period that is required to claim Entrepreneur's Relief on sale of shares from 12 months to two years.

The Economy

The Government is has reduced it's predictions for growth in 2019-20 to 1.6%.

Summary

The biggest beneficiaries of the budget were independent retailers, pubs, cafes and restaurants, and Higher Rate tax earners. Whilst the budget was billed as an end to austerity, there did not seem enough in it for small business owners to constitute a noticeable difference.